India Bonds Complete Second Weekly Advance After Inflation Slows

Indian bonds completed a second weekly gain on speculation slowing inflation will enable the central bank to cut interest rates further.

Wholesale prices rose 6.62 percent in January, the least since November 2009, the commerce ministry reported in a statement yesterday. That was less than the 6.98 percent median estimate in a Bloomberg News survey. The Reserve Bank of India last lowered the repurchase rate by 25 basis points to 7.75 percent on Jan. 29, the first reduction in nine months. Its next policy meeting is scheduled for March 19.

“Wholesale-price inflation data shows a trend that is lower than what the RBI was expecting,” said Samiran Chakraborty, an economist at Standard Chartered Plc in Mumbai. “This opens a window for a rate cut in March.”

The yield on the 8.15 percent notes due June 2022 fell one basis point, or 0.01 percentage point, to 7.83 percent this week in Mumbai, according to the central bank’s trading system. The rate rose one basis point today.

The Reserve Bank predicted inflation at 6.8 percent by the end of March in its last policy review on Jan. 29.

The one-year interest-rate swap, a derivative contract used to guard against fluctuations in funding costs, rose one basis point today and this week to 7.61 percent, according to data compiled by Bloomberg.

To contact the reporters on this story: V. Ramakrishnan in Mumbai at rvenkatarama@bloomberg.net; Jeanette Rodrigues in Mumbai at jrodrigues26@bloomberg.net

To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net

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